Cryptocurrency with a taste of madness: what is behind the popularity of memecoins

Recently, well-known analysts and experts have been almost unanimously shouting that the altcoin trend is about to end, and they will be replaced by memoCoins. At least due to a rather long period of stagnation, which made investors pay more attention to risky projects with high potential returns. However, it is believed that meme coins are more about the surrounding hype than about real benefits. Let’s find out if this is true. And why buying memecoins is playing with fire for unprepared traders.

Content

1 Are memecoins really that ridiculous?
2 The madness behind the squirrel
3 Risks and dangers of investing in memecoins
4 How to protect yourself

Are memecoins really that ridiculous?

Federico Variola, CEO of the Phemex platform, shared his professional vision of the new trend in the world of cryptocurrencies. В interview Coindesk, he noted that memtokens such as Dogecoin (DOGE), Shiba Inu (SHUB) have been popular for several years due to their simplicity, humor, and community involvement. Unlike NFTs, which are often valued for their uniqueness and creator’s reputation, memecoins gain popularity through virality.

In addition, these tokens are gradually expanding their functionality: holders can receive additional rewards through staking (a kind of analogue of a traditional bank deposit), by using them on Play-to-Earn platforms (the ability to earn through games), and decentralized management (Shiba Inu holders can vote on important decisions related to the project). However, the key is the meme itself, around which the coin and community are built.

Memtokens have become a symbol of a new trend – SocialFi, which combines finance with social activity. The main principle is the ability to interact with each other on a social network and monetize this activity (receive tokens for comments, cool content, etc.). But the most important thing is the ability to interact directly without the need for a centralized intermediary.

Also, the co-founder of the Ethereum network Vitalik Buterin believes. We believe that it is people who determine what they will fund, so memecoins have gained popularity because of that:

Expectations of quick money.
Simplicity and accessibility. Memcoins are easier to understand than complex concepts such as NFTs or decentralized financial interfaces (DeFIs). And you can buy them for literally $1.
Community and interaction for fun. Memes are closely related to online culture, humor, and community engagement. They create a sense of belonging to something significant and participating in something fun and trendy.

The madness behind the squirrel

The latter includes the phenomenal growth of the Peanut token, which arose against the backdrop of the tragic story of the euthanasia of the famous squirrel of the same name on the Internet. This animal was rescued in 2017 by Mark Longo. The owner began to keep Instagram page about the animal and soon the number of subscribers exceeded 600 thousand (now this figure is approaching 1 million).

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A post shared by Peanut The Squirrel (@peanut_the_squirrel12)

The story took a dark turn when the New York City Department of Environmental Conservation decided to confiscate Pinat, as it is illegal to keep a wild animal in the home without the appropriate licenses and permits. Later, the animal was euthanized due to fears of rabies (which were not justified). The tragedy of Longo’s pet became widely publicized on the eve of the US presidential election. Even Elon Musk and Donald Trump joined the discussion.

In early November, in honor of Pinat, the Pump. Fun platform launched PNUT token — memcoin on the Solana (SOL) blockchain. On the wave of hype, it reached a market capitalization of more than $1 billion in less than 48 hours (!!!).

Thus, the capitalization of the token in honor of the squirrel ($1.6 billion) has already surpassed the capitalization of Trump’s crypto project World Liberty Financial (WLFI) by 79 times ($20.2 million).

Risks and dangers of investing in memecoins

Memcoins may seem like simple entertainment, but investing in them is risky. In addition to high volatility, this cryptocurrency is full of fraudsters. Experts of the analytical blockchain company Webacy identified three key signs that will help avoid problems.

1. 1. Concentration of owners

If the 10 largest wallets own more than 20% of the tokens, this may indicate a high risk of fraud. The owners of these wallets are able to manipulate the price. For example, the Pong token on the Raydium platform, which had a capitalization of $80,000 in November 2024, completely depreciated a few hours after the start of trading. Holders of Neiro memecoins ($1.1 billion capitalization) may also be at risk, as more than 70% of the tokens are distributed among 10 wallets.

2. Dishonest influencers

Some bloggers get paid by developers for actively promoting tokens. Then they wait for the price to rise and sell them. This scheme is well known as Pump and dump (P&D). The point is that there may be no real value in tokens, but advertising does its job. Therefore, when the artificially created excitement in the market falls, the value of the asset acquires a real value (in our case, it falls). Most uninformed players are left holding their noses because they bought billions of tokens for thousands of dollars, and now they are worth a couple of cents.

Among the suspected P&D accounts on X: @CryptoGodJohn, @TheCryptoKazi, @crypto_TomTom, and @cryptostasher. And of course, many have heard of Sahila Arora (@Habibi_Comm). Suspicion has also recently fallen on of the famous blogger MrBeast. Elon Musk and his Dogecoin (DOGE) are often included in the cohort of dishonest promoters.

3. Potentially dangerous functions of smart contracts

For example, the popular Solana-based platform Pump. Fun is issuing a limited number of tokens, approximately 800 million. Some platforms allow issuers to create an unlimited supply of coins after launch, which potentially reduces the share of investors (the more coins in circulation, the less each one will be worth). This problem is especially relevant for of the TON blockchain (It is worth recalling the story of the Hamster Kombat, whose developers quietly changed the number of tokens from 10 billion to 100 billion). To avoid risks, make sure that the developers have taken a step called «renouncing the contract» (they will not be able to change the number of tokens).

For example, according to the GoPlus platform, the developers of the Tamadoge (TAMA) memcoin potentially have the ability to generate many tokens, which can lead to significant fluctuations in token prices. According to the GoPlus platform, 68.49% of the coins are concentrated on the top 10 wallets.

Another unpleasant feature is the ability to block an address from selling tokens. Wallet owner 0xAf2358e98683265cBd3a48509123d390dDf5453 holds $50 million worth of PEPE memecoins, but cannot sell them because the developers blacklisted it for «sniping» (buying in the first seconds of listing). The owner of this address spent only $27 in 2023.

How to protect yourself

Use analytical services such as Webacy, Rugcheck, GoPlus, or DEXSCREENERto check the security of the tokens.
Always conduct your own analysis (Do Your Own Research — DYOR). Study who is behind the development, whether there is a roadmap for the project development, which well-known investors have joined. If the address of the token of interest matches the one stated on the official website of the developers, and so on.
Murad Makhmudov, a well-known trader and connoisseur of memoins notedsaid that the number of users who have spent more than $1 thousand can be a useful metric for determining the strength of a community. As an example, he cited the number of holders of the most popular memecoins who bought more than $1 thousand worth of coins: